Inflation and Idiots

131 replies [Last post]
army13A's picture
Offline
Joined: 2009-03-21

Ron 14 wrote:Everytime something unusual happens in the market the cry is "this time is different." It isn't even a market thing, it is a cultural thing. People want results, now. They don't want to be patient, they don't want to put effort in, they just want easy money, easy returns, easy weight loss. You can take your ab roller and your jenny craig and it may or may not work, daily exercise and a balanced diet will and always has. You can take your hedge funds and your Jim Cramers and all that crap, it may work and it may not. Taking ownership stake in quality companies while sticking to diversification, asset allocation, and rebalancing always has.
 
Ron, I have to agree with you here.  Look at where we have come from when the Dow was at 6700.  Of course you have the self proclaimed experts who warn of a huge selloff instead of being optimistic.  I'm not saying that it's not going to happen but because of these "warnings", how many people are sitting on the sidelines? The world was going to end after 9/11, according to the media and that time it was "different" as well.  Emotions obviously have an effect on what is going on as well. 
 
Markets go up, markets go down but over the long haul, they go up a lot more than they go down.  I, for one, will continue to pick up some good stocks at these discounted prices.  When you have Bank of America, that was trading at $3/share and now is trading at $17, that's a bad thing? People slammed Mitt Romney during the elections when he said it's a buying opportunity.  He was right.   

BondGuy's picture
Offline
Joined: 2006-09-21

Morean- How do you define quality?
 
BTW- I'm not saying don't buy stocks. I'm saying don't sell them as an inflation hedge.
 
And even for you genius market timers/position builders out there- there is no way as an investor that i would trust your ability to protect me from harm. No one is that good!
 
 

Moraen's picture
Offline
Joined: 2009-01-22

BondGuy wrote: Morean- How do you define quality?
 
BTW- I'm not saying don't buy stocks. I'm saying don't sell them as an inflation hedge.
 
And even for you genius market timers/position builders out there- there is no way as an investor that i would trust your ability to protect me from harm. No one is that good!
 
 

BondGuy - I believe in varying levels of quality companies. I was mocking the "flight to quality". In my opinion, there aren't really any quality companies, because they can very quickly become "crap". You do the best you can based on what you think is true value given a thorough analysis. And not value as most analysts see it.

Milyunair's picture
Offline
Joined: 2009-09-25

I believe in quality indexes. Stocks are not an inflation hedge per se, inflation is not good for stocks. But if you look at all of the professionals trying to beat indexes, and you look at some mixture of stocks and bonds over time (60-40/40-60), I think you can still provide a lot of value to the average Joe.
Mainly through the accumulation of yield and dividends, obviously, stocks have been flat for over  decade, and bonds have outperformend over longer time frames now.
 
BUT, what about going forward? With the U.S. printing and borrowing money, interest rates are going to have to rise to attract foreign capital. The dollar is increasingly funny money.
In that sense, going beyond the historical time frame of ten or more years, but without dumbly relying on the "stocks have outperformed over long periods of time" mantra, I think you can still say, " We own good quality dividend producing stocks to help hedge inflation".
 
Along with your home, your business, and any other "real" assets.
 
As for bonds, obviously, as we need to tighten duration and quality, they are less attractive. And in my view, short term bond indexes are more attractive over trading individual issues. Not saying my way or the highway, just saying, Americans are a little bond (fund) crazy right now, with respect to stocks and cash.
 
http://www.milyunair.com/

Ron 14's picture
Offline
Joined: 2008-07-10

Moraen wrote:Define a "quality company" Ron.
 
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me.

Moraen's picture
Offline
Joined: 2009-01-22

Ron 14 wrote: Moraen wrote:Define a "quality company" Ron.
 
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me.

How do you know that the asset managers are buying "quality" companies?

army13A's picture
Offline
Joined: 2009-03-21

Moraen wrote: Ron 14 wrote: Moraen wrote:Define a "quality company" Ron.
 
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me. How do you know that the asset managers are buying "quality" companies?
 
We hire guys like you Moraen.

Moraen's picture
Offline
Joined: 2009-01-22

army13A wrote: Moraen wrote: Ron 14 wrote: Moraen wrote:Define a "quality company" Ron.
 
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me. How do you know that the asset managers are buying "quality" companies?
 
We hire guys like you Moraen.

Yes. Ron - let me take a look at your clients' portfolios. I'll get them set up.   

You too Army.

SometimesNowhere's picture
Joined: 2008-12-22

According to any equity American Fund MSFT is about the only quality company on the planet.

Ron 14's picture
Offline
Joined: 2008-07-10

I don't exactly, but I do have faith in some managers over others because of what they have done through different market cycles. Yes, I used the word faith, because going forward that is all we really have. If I don't think a manager can do it I use an index. Joe the plumber doesn't need to beat the market by 10% each year, he just needs long term market returns with some guidance so he doesn't chop himself up.

Ron 14's picture
Offline
Joined: 2008-07-10

You don't want 500, 50k accounts. I don't think I do either !!

Moraen's picture
Offline
Joined: 2009-01-22

Joe the plumber just needs to pay his taxes.

I'll tell you what Ron, I'm worried about you and this reliance on mediocrity - it's downright un-American! A little socialistic!

Otane's picture
Offline
Joined: 2008-08-04

Ron 14 wrote:Everytime something unusual happens in the market the cry is "this time is different." It isn't even a market thing, it is a cultural thing. People want results, now. They don't want to be patient, they don't want to put effort in, they just want easy money, easy returns, easy weight loss. You can take your ab roller and your jenny craig and it may or may not work, daily exercise and a balanced diet will and always has. You can take your hedge funds and your Jim Cramers and all that crap, it may work and it may not. Taking ownership stake in quality companies while sticking to diversification, asset allocation, and rebalancing always has.
 
If you don't think it is different, then maybe you should take the time and explain why things are the same. I would love to hear your economic explanation.

Ron 14's picture
Offline
Joined: 2008-07-10

Let's be honest, you aren't worried about me a bit ! You wouldn't even know it if I get hit by a car on my way to lunch. (Driver will probably be a client in Class A Founding Funds that I picked up at Jones 2 years ago) I don't think helping Joe the Plumber or Issac IT or Samantha the Stripper navigate their way through all of the financial trash that is out there and get to a comfortable retirement is being mediocre. Sure, at this stage, my business is mediocre, in 5 more years I don't think it will be. If it is they will find me in the bank break room hanging from my own shoelace.

Gaddock's picture
Offline
Joined: 2007-02-23

Ron 14 wrote:What is sad about it for you ? You are exactly where a business wants to be. You are offering a unique service, at a low cost, that nobody else is offering.
 
Sad for others who are not giving the same to their clients. Or at least something more.

Gaddock's picture
Offline
Joined: 2007-02-23

Ron 14 wrote:Moraen wrote:Define a "quality company" Ron.
 
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me.
 
With all due respect .... My GOD! You call yourself a broker??? Dude that's so f-ing lame. Go get a book called fundamental analysis for Dummies and a stock screener. If you truly believe this you are doomed to pathetic mediocrity along with your clients.
 
Are you trying to manage money or be an overdressed peddler?

Ron 14's picture
Offline
Joined: 2008-07-10

Oh its that easy. Buy a book and a stock screener and start peddling stocks. Give me a break. If I could buy and sell stocks at accurate prices I would do it for myself. I try to give you a compliment and you become Mr. Tough guy, you arrogant prick.
 
"Stockbrokers" died long ago. Very few guys are analyzing stock valuations and buying and selling on a discretionary basis for clients accounts. Most are building financial advisory practices and charging a wrap fee on the assets.

Gaddock's picture
Offline
Joined: 2007-02-23

Sorry Ron, I tried to delete the post it wont let me, it's not worth the trouble.
 
I have no doubt you do what you think is best.

Ron 14's picture
Offline
Joined: 2008-07-10

Obviously, you think what I do is a joke. I just don't know why we have to go around and around about the same sh*t every post.

buyandhold's picture
Offline
Joined: 2008-09-23

Ron, it sounds like you are running into people who don't want to own stocks, and not people who don't understand inflation.I've never met anyone over the age of 60 who didn't understand inflation. They see gas going up in price, they see their meds getting expensive, they understand inflation. I do meet lots of people who don't want to own stocks. But that's OK -- you can get where you want to go without stocks, as a client or an adviser.

Ron 14's picture
Offline
Joined: 2008-07-10

I don't think people can get where they want to go without at least a small percentage in stocks. If they understand inflation, but they don't want to own stocks, they aren't really seeing the forest through the trees. Yes, everyone will admit they have experienced price increases on basic goods their entire life, but they rather lose money to inflation "safely" (CD's, Bonds)then by watching their account values go up and down. (equities)
 
They will be able to survive their own retirement because of the physical dollars they have, but when they leave 500k behind for the college of 10 grandkids equities could have paid for all 10, but the 30 yrs of CD investments will only pay for 3. Oops.

deekay's picture
Offline
Joined: 2007-05-15

I know lots of financially successful people who own zero stocks, except the shares in their own business.  Your theory is severly flawed, Ron.  Your problem is you can't make money unless you bamboozle someone into owning some crap mutual fund.

Moraen's picture
Offline
Joined: 2009-01-22

Michael Moore has his millions in a savings account.

deekay's picture
Offline
Joined: 2007-05-15

Moraen wrote:Michael Moore has his millions in a savings account.
 
Exactly.  When you save a crapton of your income as opposed to spending it, you don't need to take on risk to outpace inflation.  But Ron doesn't get paid on savings accounts, so he screams bloody murder when someone uses a strategy that will only net 2-3%.

Ron 14's picture
Offline
Joined: 2008-07-10

deekay wrote:Moraen wrote:Michael Moore has his millions in a savings account.
 
Exactly.  When you save a crapton of your income as opposed to spending it, you don't need to take on risk to outpace inflation.  But Ron doesn't get paid on savings accounts, so he screams bloody murder when someone uses a strategy that will only net 2-3%.
 
LOL. I don't care how much you have or how much you save. Each dollar in circulation is worth less each and every year. Now does that matter to Bill Gates, no because he has so many dollars. But you can't tell me that all the money you will ever need in a 1% savings account doesn't lose purchasing power over time whether you need the funds or not.
 
I am not talking about financial success. Anyone with a lot of money is financially successful, that doesn't mean they are investing properly. Also, how exactly are people netting 3% on savings accounts ? You have FDIC insured accounts with no surrender paying over 4.5% ?

army13A's picture
Offline
Joined: 2009-03-21

Michael Moore and Bill Gates are far more the exception than the rule.  When we work with our clients, our job is to get them to their goals the most effective and efficient way possible.  Lets say we have two clients: Client A and Client B.  They're both 30 years old and their goal is to get to a million dollars by the time they hit 60 years old to fund their retirement; this is their only goal in life. 
Client A, using equities and other asset classes will require about $995/month at a 6% rate of return to get to a million dollars at 60.  Client B will require $1716/month at a 3% rate of return to get to a million dollars at 60.  Now, not saying Client B scenario is not possible but let's say that they both do that and both hit their goals at the same time.  Who actually comes out ahead?
 
Client A does because he had $721 more a month for other stuff like insurance and standard of living stuff, like healthier food and gym dues, so that when he is 60 years old, he doesn't drop dead because he's out of shape and obese.  Or he had $721 more a month to just have fun and enjoy life.  We can argue which one is more riskier but I didn't say 10% rate of return, I kept it really conservative at 6%.  To say that one can get to their goals without equities or very little is ridiculous.  Even amongst this mess that happened, guys like Nick Murray will still swear by equities all day long.  Just my 2 cents . . .

Ron 14's picture
Offline
Joined: 2008-07-10

That is exactly where I stand. Well said.

deekay's picture
Offline
Joined: 2007-05-15

Ron 14 wrote:deekay wrote:Moraen wrote:Michael Moore has his millions in a savings account.
 
Exactly.  When you save a crapton of your income as opposed to spending it, you don't need to take on risk to outpace inflation.  But Ron doesn't get paid on savings accounts, so he screams bloody murder when someone uses a strategy that will only net 2-3%.
 
LOL. I don't care how much you have or how much you save. Each dollar in circulation is worth less each and every year. Now does that matter to Bill Gates, no because he has so many dollars. But you can't tell me that all the money you will ever need in a 1% savings account doesn't lose purchasing power over time whether you need the funds or not.
 
I am not talking about financial success. Anyone with a lot of money is financially successful, that doesn't mean they are investing properly. Also, how exactly are people netting 3% on savings accounts ? You have FDIC insured accounts with no surrender paying over 4.5% ?
 
Nope.  They're not FDIC-insured, but they're backed by much better-run institutions than FDIC.  But, I've got liquid, safe accounts that net 3% minimum that are creditor-protected, tax-deferred,  self-complete in the event of disability, bypass probate, and pay a multiple of what's in the account at death tax-free. 
 
By the way, how are those equity positions doing these days versus inflation?  What kind of rate of return will you need on them next year to get them back to where they were 3 years ago?  You know, when they were supposedly outpacing inflation?

Ron 14's picture
Offline
Joined: 2008-07-10

Doesn't matter because I don't put people in equities when they have a three year time horizon.

Ron 14's picture
Offline
Joined: 2008-07-10

I would rather win games 28-10 than 10-7.
 
I see your point and it is possible, I just don't think it is logical.
 
 

deekay's picture
Offline
Joined: 2007-05-15

Ron 14 wrote:
I would rather win games 28-10 than 10-7.
 
I see your point and it is possible, I just don't think it is logical.
 
 
 
You may want to win in blowout fashion with the chance of losing, but what do your clients want?  Are they truly that dumb that they can't be trusted with any of their money?

Jebediah's picture
Offline
Joined: 2009-07-10

deekay wrote:Ron 14 wrote:
I would rather win games 28-10 than 10-7.
 
I see your point and it is possible, I just don't think it is logical.
 
 
 
You may want to win in blowout fashion with the chance of losing, but what do your clients want?  Are they truly that dumb that they can't be trusted with any of their money?

 
 
The clients are not the dumb ones in that relationship.

Ron 14's picture
Offline
Joined: 2008-07-10

deekay wrote:Ron 14 wrote:
I would rather win games 28-10 than 10-7.
 
I see your point and it is possible, I just don't think it is logical.
 
 
 
You may want to win in blowout fashion with the chance of losing, but what do your clients want?  Are they truly that dumb that they can't be trusted with any of their money?
 
Well if they knew exactly what to do with their money they wouldn't need you or me. From what you are telling me you coach people to save more of their income. Big f**king deal. Great value added service. That is genius !

Ron 14's picture
Offline
Joined: 2008-07-10

Jebediah wrote:deekay wrote:Ron 14 wrote:
I would rather win games 28-10 than 10-7.
 
I see your point and it is possible, I just don't think it is logical.
 
 
 
You may want to win in blowout fashion with the chance of losing, but what do your clients want?  Are they truly that dumb that they can't be trusted with any of their money?

 
 
The clients are not the dumb ones in that relationship.
 
And there is Jeb, the market timing guru who again comes out of left field with commentary that doesn't make sense. What country are you from Jeb ? It definitely isn't English speaking.

deekay's picture
Offline
Joined: 2007-05-15

Ron 14 wrote:deekay wrote:Ron 14 wrote:
I would rather win games 28-10 than 10-7.
 
I see your point and it is possible, I just don't think it is logical.
 
 
 
You may want to win in blowout fashion with the chance of losing, but what do your clients want?  Are they truly that dumb that they can't be trusted with any of their money?
 
Well if they knew exactly what to do with their money they wouldn't need you or me. From what you are telling me you coach people to save more of their income. Big f**king deal. Great value added service. That is genius !
 
Not only do they need to save more, I give them advice on where to save.  Unlike you, I don't need to shill some garbage mutual fund in order to make money off a client.  I don't have a problem with someone who wants to invest in a piece of real estate if they're set up properly.  You have to convince them they shouldn't in order to make a paycheck.

Ron 14's picture
Offline
Joined: 2008-07-10

That is exactly it. I get paid the most on laddered fixed annuities so I have no idea what this guy is talking about. I also benefit from referring back to bank partners. If anything I have more options available to me because I am in a bank program. Whatever. This guy is selling glorified savings accounts and coaching people to save more. I think establishing an emergency fund is financial planning 101, but this guy is building a practice on it.

deekay's picture
Offline
Joined: 2007-05-15

Ron 14 wrote:That is exactly it. I get paid the most on laddered fixed annuities so I have no idea what this guy is talking about. I also benefit from referring back to bank partners. If anything I have more options available to me because I am in a bank program. Whatever. This guy is selling glorified savings accounts and coaching people to save more. I think establishing an emergency fund is financial planning 101, but this guy is building a practice on it.
 
Wrong.  I'm able to show clients that they don't need to put as much money at risk as you do to reach their full potential. 

Ron 14's picture
Offline
Joined: 2008-07-10

When did I say how much I put at "risk" ? I didn't. So you don't really have a clue. 25% equities is that evil ? 50% ? 75% for a 40 year old ? Nevermind. I don't even want your explanation.

SometimesNowhere's picture
Joined: 2008-12-22

Ron, honest question...
 
Aren't you afraid of a W shaped recession? I look at the market (like the run-up today) and can't help but feel that it's totally irrational and that we are due for a correction.

Ron 14's picture
Offline
Joined: 2008-07-10

I have no idea. Could we retest lows ? Yes. Is it possible the Dow never goes below 8k again, EVER? Yes. Since I don't know exactly what is next, and if someone claims they do they are nuts, why play that game? Diversify, Own different Asset Classes, and Rebalance.
 
Keep in mind I work at a bank where my average account is around 100k and I dont have 100% of most of my clients assets. Is there a better way ? Do these people need anything else ? Does it matter if I do the same thing with someone who has 1mil ?

deekay's picture
Offline
Joined: 2007-05-15

Ron 14 wrote:When did I say how much I put at "risk" ? I didn't. So you don't really have a clue. 25% equities is that evil ? 50% ? 75% for a 40 year old ? Nevermind. I don't even want your explanation.
 
You're right.  You didn't.  But you are convinced you have to put your prospects money at risk when they don't want to.  And that's my point - to outpace inflation, you can either put more systematic money into one's savings and growth accounts, or they can put more money at risk.  I'd say on average, my clients have a more conservative allocation than most people of a similar age.  The difference is they save more of their income than their peers.  They could put more money at risk if they wanted to, but they don't want to.

Ron 14's picture
Offline
Joined: 2008-07-10

I put more of my clients money at risk then they want to ? No, I profile them and their tolerance for account fluctuations. If they don't want it, fine. Do I think they should ? Yes, and I tell them so.

army13A's picture
Offline
Joined: 2009-03-21

deekay wrote: to outpace inflation, you can either put more systematic money into one's savings and growth accounts, or they can put more money at risk. 
 
How does that work? If you have a savings account with a 2% APY, putting more money into it outpaces inflation?
 
Deekay, I assume you are talking about Par WL.  I do agree that some of the big mutual companies that pay pretty good div rates is pretty astonishing and very conservative. 

LockEDJ's picture
Offline
Joined: 2009-07-06

iceco1d wrote:....So, you are telling me that 6%+ returns aren't going to keep pace with inflation?  ...
 
Because you've never lived in a hyper-inflated world, don't believe that you never will. Jus' saying.
 
 
 

LockEDJ's picture
Offline
Joined: 2009-07-06

Ice ...
 
No ... I don't think I missed it, although I perhaps overstated my point. A simple return to 1979 America would be sufficient, not Zimbabwe, to destroy seniors that might (overweight) investments in intermediate to long term individual bonds today ... in only five years. And I've read some evidence that investing in any laddered bond portfolio (particularly in callable bonds) that suggests it might in and of itself be flawed as a strategy, but that's another story.
 
FWIW - I disagree with the tenor of attempting to change a client's predisposition. Right or wrong, I believe my job is only to educate the client of the ramifications of his many choices and faithfully execute his wishes after that point, incurring the least possible expenses along the way. In that we agree.
 
 

BondGuy's picture
Offline
Joined: 2006-09-21

LockEDJ wrote:
Ice ...
 
No ... I don't think I missed it, although I perhaps overstated my point. A simple return to 1979 America would be sufficient, not Zimbabwe, to destroy seniors that might (overweight) investments in intermediate to long term individual bonds today ... in only five years. And I've read some evidence that investing in any laddered bond portfolio (particularly in callable bonds) that suggests it might in and of itself be flawed as a strategy, but that's another story.
 
FWIW - I disagree with the tenor of attempting to change a client's predisposition. Right or wrong, I believe my job is only to educate the client of the ramifications of his many choices and faithfully execute his wishes after that point, incurring the least possible expenses along the way. In that we agree.
 
 
 
This is total crap!

buyandhold's picture
Offline
Joined: 2008-09-23

Does anybody worry that if interest rates go up that bond funds will do poorly.Isn't the reason that bonds have gotten 6 pct over the past 20 years is that interest rates have gone down steadily.

voltmoie's picture
Offline
Joined: 2008-11-05

LockEDJ wrote:iceco1d wrote:....So, you are telling me that 6%+ returns aren't going to keep pace with inflation?  ...
 
Because you've never lived in a hyper-inflated world, don't believe that you never will. Jus' saying.
 
 
 I'm starting to think "just saying" is pretty worn out.  Just saying...

LSUAlum's picture
Offline
Joined: 2009-10-18

These boards are entertaining to say the least. I've been a long time lurker. I particularly enjoy when one part of the argument is that 'old strategies, buy and hold, etc' don't work it's a brave new world, etc etc. Then a few pages later the argument of 'we could return to 1979 hyperinflation, or the remember back in such and such date when....'.
 
And then on top of it all, people will bash 'experts' on TV or analysts or some other person for their thoughts. It's as if having a few years in the industry has made everyone a genius with their product, clients, etc but they fail to think that it's made anyone else a genius also.
 
The bottom line is that no one knows the right answer. They think they know but they don't. You cannot say with certainty anything. You can however point to the past and use that as a guideline. The arrogance of anyone who says their way is the only way is astounding.
 
Why slam mutual funds? They are more expensive, but they for the most part, outpace inflation and give clients and opportunity to put themselves in a better position for the future. Real Estate, Options, Commodities, VUL's, Leveraged Debt, Fixed Income, Equities, etc, all have a place in someone's portfolio. No one strategy is a must. Stop acting like you guys are any more qualified to espouse your theories than a talking head like Cramer.

anonymous's picture
Offline
Joined: 2005-09-29

LSUAlum, please tell me where VUL belongs in someone's portfolio.

Please or Register to post comments.

Industry Newsletters
Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×